Today, conflicts of interest make top headline news daily and fuel the wrath of the DOJ and FTC. Greed is at the root of carelessly mixing business lines, which is why Brad Inman says separating ownership is often necessary to avoid conflicts.
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When I was a young newspaper columnist, I was offered $20,000 by a developer to do a story on his development. He proposed disguising the payment as a research project. Though I was scrambling financially at the time, and I admit that I was tempted, I declined.
That’s called a bribe and a blatant conflict of interest.
Sometimes conflicts are more subtle.
Real estate brokers and agents have relationships, even ownership or equity, with title and mortgage companies. They sometimes steer business to those providers without clear disclosures to consumers about the nature of those relationships, even when it could violate RESPA laws.
Today, conflicts of interest are at the top of the news with headlines on the crypto meltdown, where exchanges mixed lending and hedge fund businesses with what we were led to believe were independent crypto marketplaces.
Also in the news are stories about big accounting firms, like E&Y, spinning off its consulting business from its auditing practice. The conflicts got it in a heap of trouble.
Bankers and analysts at the same firm have a similar conflict. An analyst gives a company a good stock rating, and the other side of the shop advises the firm on M&A or fundraising.
Greed is at the root of carelessly mixing business lines. Separating ownership is often necessary to avoid conflicts.
Twenty years ago, I owned an online real estate company, Homegain, at the same time that I owned Inman News. The two companies had separate management teams and constructed a wall between the two enterprises. Inman News also disclosed my ownership in Homegain when it covered the company.
Nevertheless, the duality could appear conflicted and, at times, was messy. Selling Homegain ended the problem.
I resolved never again.
To this day, I am accused of owning stock in this real estate company or that one, like Zillow or Compass, which I don’t.
Vice versa, undisclosed investors in media companies create a similar conflict. For me, it’s not worth the hassle.
Inman readers hate conflicts of interest and understandably are on the lookout.
In the news business, advertisers are known, which helps the reader know what’s up. But it can still cause skepticism.
Transparency about conflicts goes a long way. Being opaque is careless.
So-called “experts” wax about companies on blogs, conference stages or social media. What we often don’t know is that they are promoting paid clients or that they have shares in those businesses. The temptations are understandable but highly suspect if not disclosed.
One such expert once told me he was protecting his client’s confidentiality. Bullshit.
Oversight and regulation are necessary when companies and industries persist in misbehaving.
An example is buyers and sellers being confused about who represents who in a transaction and how everyone is paid. Compensation and agency relationships that are clear to the industry can be muddy for the consumer.
Real estate has its share of these fuzzy relationships.
The bottom line: Everyone is better off if the associations are disclosed.